patrick.net

I've seen a few rounds of price drops in the markets I watch lately.

Probably the sellers trying to unload properties during the selling season.

We'll see.

Home sales are in the gutter where I'm at but prices aren't moving too much, just inching downwards.

Around -4% so far YoY in Laguna Hills according to Zillow.

I don't think sales will increase hardly anywhere this year at all. Unemployment and under employment are still at or near peak levels in most states while wages are still stagnant or dropping. At the same time we're seeing prices on gas rise to higher levels which will spook most, and if sustained at such prices will push us back into a recession.

No one sane or sensible should be expecting a real sustained housing recovery of any sort until unemployment drops quite a bit and wages rise. That seems to be years away at very best. IIRC the Fed has already said they expect jobs won't recover to pre bust peak until 6 years or so from now, and that is assuming we don't double dip.

I'd also agree the general trend is downward in many markets, at least in California(from dataquick):

http://www.dqnews.com/Charts/Monthly-Charts/CA-City-Charts/ZIPCAR.aspx

For instance, Santa Clara county has been a mixed bag, with huge drops in some communities but slight upticks in others(data from Feb 2011; % Y-o-Y):

Santa Clara County 1148 $432,500 $460,000 -5.98%
ALVISO 2 $392,750 n/a n/a
CAMPBELL 16 $589,000 $562,500 4.71%
CUPERTINO 38 $717,500 $695,000 3.24%
GILROY 50 $350,000 $385,000 -9.09%
LOS ALTOS 24 $1,632,500 $1,612,000 1.27%
LOS GATOS 33 $975,000 $893,750 9.09%
MILPITAS 42 $385,000 $399,250 -3.57%
MORGAN HILL 22 $475,500 $612,500 -22.37%
MOUNTAIN VIEW 40 $610,000 $645,000 -5.43%
PALO ALTO 25 $1,200,000 $1,434,000 -16.32%
SAN JOSE 689 $370,000 $420,000 -11.90%
SAN MARTIN 3 $520,000 $855,000 -39.18%
SANTA CLARA 69 $463,000 $512,000 -9.57%
SARATOGA 17 $1,135,000 $1,450,000 -21.72%
SUNNYVALE 67 $550,000 $609,500 -9.76%

Nothing particularly special about Santa Clara county, just one market I follow. These numbers are a little out of date too. The most recent report for the Bay Area (April 14, 2011) is here:

Sales up, Prices Down for Bay Area Housing Market
http://www.dqnews.com/Articles/2011/News/California/Bay-Area/RRBay110414.aspx

Sales Volume Median Price
All homes Mar-10 Mar-11 %Chng Mar-10 Mar-11 %Chng
Alameda 1,506 1,400 -7.0% $360,000 $341,000 -5.3%
Contra Costa 1,412 1,414 0.1% $275,000 $245,000 -10.90%
Marin 225 249 10.7% $640,000 $668,250 4.4%
Napa 136 128 -5.9% $327,500 $308,000 -6.0%
Santa Clara 1,602 1,665 3.9% $500,000 $460,000 -8.0%
San Francisco 500 495 -1.0% $675,000 $650,000 -3.7%
San Mateo 533 579 8.6% $615,000 $555,000 -9.8%
Solano 660 608 -7.9% $215,000 $190,000 -11.60%
Sonoma 466 513 10.1% $318,000 $285,000 -10.40%
Bay Area 7,040 7,051 0.2% $380,000 $360,000 -5.3%

Still, I expect something of a weak upswing for prices this spring/summer in many markets before a bigger drop this fall. But I could be wrong...

joshuatrio says

I’ve seen a few rounds of price drops in the markets I watch lately.
Probably the sellers trying to unload properties during the selling season.
We’ll see.

I'm looking in the Bay Area. What market are you in Josh? These REO's are being priced so low that the listing agent does not need to host an open house. Any buyer agent that goes in with a client will result in a few more potential buyers piggybacking them in. It's nuts how the buyers w/out buyer agents with them are like vultures just stalking the property until someone opens the door. I guess these low prices always induced bidding wars that took the prices over $500k in my area (list price $415k or so). But lately, nobody is overbidding by alot unless there is something very special about the property.

Higher fuel prices may just drive demand higher for properties with good public transit and access. At these prices, some of those unemployed can settle for lower paying jobs and be able to purchase. We'll see what happens this spring. It will be interesting. What I see in my area are 3 desirable properties priced extremely low, and probably >50 interested parties of which none of them will overbid by much.

Here are 2 of the 3 I'm talking about. I already am in contract with the 3rd :)

http://www.redfin.com/CA/Daly-City/32-Christopher-Ct-94015/home/578094

http://www.redfin.com/CA/Daly-City/679-Saint-Francis-Blvd-94015/home/2026036
^^ I actually offered on this one when it was a short sale, and it was approved for $475k. At that time, the price was a steal. This was back in November. The 2nd lien killed the deal though. My old short sale approval letter showed that the bank would net $403k from the sale; it went to auction at the court house for $403k, and no takers. From the looks of this listing, the bank would net ~$403k after paying commissions. Very persistent in getting $403k for this property.

Edit: Here's a 4th, but it's considerably smaller.
http://www.redfin.com/CA/Daly-City/684-Higate-Dr-94015/home/1889582

vain says

What market are you in Josh?

South of you. Monterey area.

Sacramento is headed downward.

Who wants to catch a falling knife? Most people still think that housing has bottomed but the mainstream media already pulled the plug on the housing market. We see nothing but bad news in housing now and people are beginning to wait on the sidelines.

no. not at all. My GF is looking to buy a 3+ unit place and she's gotten significantly out bid with CASH offers 3 times. And her offers were strong.

this is in SF.

I want to know WTF is going on.

I think it's euro investors coming in with a discount thanks to the difference in currency.

These are good areas, around Dolores park, though.

I think the element of organized crime is more prevalent than generally recognized. For example, consider properties listed for sale in Richmond, CA. You can find many now boarded-up houses for sale for $70,000 or less that show a history of trading at $500,000 - 600,000. Can anyone doubt that there never was a genuine buyer at these levels? The money was simply stolen. Yet, nothing is done about it.

I still think housing price will come down even here in the SF bay area and more so in other parts of the country. One facet of the housing market I don't see too much written about is all the baby boomers that are starting to retire. Will they be wanting to down size? Sell of 2 homes? Maybe condo sales or townhouse sales will increase do to this.

Just my observations of still over heated market. Following the home price line from the 1800's to the present, homes are still way over priced.

Happy sitting on the side lines.

It's interesting to read this after I just did an analysis of sale prices of condos per quarter for one particular zip code. This is obviously a small sample size so I did not know how much weight to put on it.

Here is some of the most recent data I got from the multiple listing service:

Sale Price per Square Foot:
2010 Q1: $279
2010 Q2: $287
2010 Q3: $260
2010 Q4: $261
2011 Q1: $234

Just as "vain" noted, there is a precipitous drop in the most recent quarter from the previous quarter as well as from the same quarter a year earlier. Note, however, that there were only 19 sales in 2011 Q1, so the data can easily be skewed. I was going to wait until the end of the next quarter to see if this is an anomaly or a trend. After reading "vain's" post, I'm starting to think this is a trend and not just an anomaly. This may be a delayed result of the ending of the home-buyer credit.

Other observations from my data:
1) Average Days on Market has increased to 98. The same quarter a year earlier was 70 days.
2) The number of units sold is about the same as last year's but significantly lower than 2005-2008. (I did not check data from before 2005, but I may research it later.)

I'm seeing condos getting hammered in the bay area. The ones built around the peak are losing their loan eligibility one by one. This link from patrick's front page partially explains the situation:

http://www.sfgate.com/cgi-bin/article.cgi?source=patrick.net&f=/c/a/2011/04/10/BUHC1IRH7P.DTL&tsp=1

It seems like they're going from FHA eligible to cash only... and then the value plummets like whoa. It's a similar situation to cash only foreclosures that the OP mentioned. I wonder what the dinner party conversation is like in those buildings.

There are foreigners coming in and buying in California. The local working guys can't afford the houses until the prices drop some more. Some numbers may be instructive: quarterly growth in the USA since 1947 has been 3.3%, while the population grew from 143,000,000 to 300,000,000+ today. If the population of people making a enough money to buy outragously priced houses is dropping, and there is a gigantic shadow inventory of millions of houses that are underwater and going into foreclosure, how will prices go up? You know what is going up? Apple, Caterpillar, Deere, Monsanto, Samsung, Pfizer, Potash, ADM, Verizon, Toyota, Ford, Universal, Fox, Walmart because they sell stuff that people around the world buy and will continue to buy. Some of these companies are even given corporate welfare or bribes to make stuff that isn't even wanted (e.g. GE, windmills, solar). Ask yourself: have you seen a bunch of people sleeping on the sidewalk waiting to buy that house for cash? They do that for iPads.

I know what is going up. And I have seen the bunch of prepole sleeping on the sidewalk wanting to buy their ipads for cash. Can they do that for housig (eg. solar mills, bribes, GE style)? Tell me more.

I live in Eastern Pennsylvania, half-way between NYC and Philadelphia. Over the last 3 years, home price remained overvalued and most properties continued to be list at or near 2007 2Q levels. As a potential homebuyer, I've remained on the sidelines. About 1 1/2 years ago, I approached an owner of a 2,300 SF townhome in a medium density subdivsion who ofered to sell it to me $20k ABOVE what he purchase it for in 2007 3Q. About 4-6 months ago, I noticed a significant drop in home prices. According to the local paper (which has viewed home values through rose colored glasses) YOY home prices have dropped 16%. The owner of the townhome still has his property listed above what he paid or, however, the former model unit in the development just sold for $100k less than what he's asking.

Potential buyers are like vultures stalking the property. That is similar to lining up to get an iPad. At least with an iPad, you are somewhat assured that you'd get one if you have a good place in line.

Lately when I go into the properties to look at them, the neighborhood is nice and quiet, and nobody notices us. Once the door open, flocks of people start showing up in front of the house asking if they can go in with us. There are times when we slip in fast and lock the doors too. Those same flocks of people would start appearing in the back yards of the property, and even ring the door bell.

There is plenty of demand but it just doesn't seem like any of them is a prospect to be sucked into a bidding war. There is a lack of quality properties that are priced right for them.

I'm in Florida and here's what I've noticed:

1 - Foreclosures going to auction have essentially stopped. Last year there were hundreds of properties going to auction, lately there have been less than a dozen. This week picked up a bit, and next week is higher, but about half of this'.

2 - A lot of properties are being listed as short sales with very low prices. These are essentially bogus listings saying "Make an offer - we suggest $X". The banks will then sit on it until the market price falls to those levels.

3 - Anything that actually has a reasonable price for an investor already has multiple bids on it. Some properties I've seen listed the agent refuses to show because of this. For whatever reason, casual buyers appear to be dissuaded from creating or participating in bidding wars (unless the agent is also the buyer, see #6).

4 - More places are being sold while people are still living in them. Listings used to be almost exclusively of empty houses, now it looks like they're more typical sellers (at least, in the stable neighborhoods).

5 - I see some individuals holding a number of properties bought at very low prices in the open market. I don't know how this happened (they were not foreclosures) but they are now listed for wildly optimistic prices. It may have been one of those "We buy Ugly Houses" deals.

6 - I'm seeing more properties being listed by agents ... again.

7 - Overall, house prices are continuing to fall. They've reached a low point, I think, where prices are actually reasonable again. But it's hard to say this is a minimum. A large local employer has announced layoffs and foreclosures are bound to pick back up (the lull I'm attributing to the robosigning scandal), which will put additional downward pressure on values. There's a lot of money in the area and I think that's created some stability for now, but I don't think it can last.

That being said, there are now some reasonable prices on decent houses - the market ($/sq.ft) is about the same place it was in ~2001/2002 - except there's a lot more inventory in the market now than there was back then.

It must be becoming more local I just got an email sayin my zillion estimate up 10% last month

I don't put much faith innzillows numbers but they usually get the direction right

On the flipside just bought an reo in a hard hit area I paid around 1998 price level but prices there could be falling
There too many foreclosures not enough buyers

In Seattle where I live it's a real mix. The not-so-nice areas have 20%+ discounts and are selling. In the nicer areas prices are listed much too high (still looking for 2007 prices) but they are sitting on the market for a year or more. Some have been taken off, some sold recently after dropping their prices 20%+/-. More have been listed recently at hight prices but none are selling.

Definitely not the bottom of the market here yet. At least another 20% to go I'd say. I'm glad I sold when I did and am renting.

vain says

There is plenty of demand but it just doesn’t seem like any of them is a prospect to be sucked into a bidding war. There is a lack of quality properties that are priced right for them.

I'd characterize this less as actual demand (measured, say by #houses purchased/unit time), and more 'potential but anecdotal' demand. After all, these folks you've run into could change their mind, or they could be priced out of the market by tighter credit requirements when they do decide to buy in the future.

I noticed a some big price drops in my area, houses listed 25-50% under their "Zestimate" on Zillow.

I went to have a look at a few of them.

Here's what was odd. There were often no signs out front, although the places were empty. Some had signs for a company called "portfolio solutions"...not your standard realtors.

I was expecting to find complete junk at the prices they were offered at, but strangely enough there were some very nice properties; new double paned windows, study looking frame, no appear ant rotting or leaking roofs, cared for appearance.

Another strange thing was that they would only be listed on Zillow for a few days.

My thinking is that these houses are probably "shadow inventory" owned now by some investment company, and they prices they are trying to sell at represent a real baseline property for the houses.

Compared to rents, the prices they are offering would be reasonable, maybe still a little too high, but for this area, that is really something.

What I take away from this is: Be Patient.

Those prices are what houses in the area should be going for, and soon ALL houses for sale will have similar price tags on them.

There is still room to fall, at least here in the East Bay Area of San Francisco.

Rob, this is exactly what I am seeing here as well except these properties are owned by banks. I'm using a agent's account on the MLS so I actually see the sales price way before Redfin and county records; not just talking about listing prices. Before, there would be massive bidding wars of 100K+ over asking. Now an overbid of 5% wins it all it.

I currently live in NY and to my surprise in such a huge market I've seen prices inching downwards. However, realtors and cash buyers are still making house prices too damn expensive.

Dude, you must all be crazy to be paying 400 Grand for a TEARDOWN! It is a 50 year old House. The value of the house is 0 in my opinion. Seriously you are paying 400 Grand just for a 3000 sqft piece of land?

vain says

http://www.redfin.com/CA/Daly-City/679-Saint-Francis-Blvd-94015/home/2026036
^^ I actually offered on this one when it was a short sale, and it was approved for $475k. At that time, the price was a steal. This was back in November. The 2nd lien killed the deal though. My old short sale approval letter showed that the bank would net $403k from the sale; it went to auction at the court house for $403k, and no takers. From the looks of this listing, the bank would net ~$403k after paying commissions. Very persistent in getting $403k for this property.

So what is the point you are trying to make?

vain says

Potential buyers are like vultures stalking the property. That is similar to lining up to get an iPad. At least with an iPad, you are somewhat assured that you’d get one if you have a good place in line.

Lately when I go into the properties to look at them, the neighborhood is nice and quiet, and nobody notices us. Once the door open, flocks of people start showing up in front of the house asking if they can go in with us. There are times when we slip in fast and lock the doors too. Those same flocks of people would start appearing in the back yards of the property, and even ring the door bell.

There is plenty of demand but it just doesn’t seem like any of them is a prospect to be sucked into a bidding war. There is a lack of quality properties that are priced right for them.

Teddybearneil says

So what is the point you are trying to make?

Point is prices dipped and people got off the sidelines. Of course there are still people that are sidelined from the sidelines that will never move into the sideline.

That's how much properties cost in the Bay Area. If you think a 50 year old house is old, you must be living in a new place. There are arguments about newer having lower quality. This 50 year old property may stand longer than the place you are living at now.

I never pay attention to anything thats published that has to do with houses. I go around and look and believe my own eyes always. See. They'll screw you to lightpole in ten seconds if they can with statistics to get you to buy.

See prices are dropping of course. However don't ever go off of feel good numbers. Or just plain feeling good. Use your head. Why be a retail sucker, when your dealing with so much money?

Theres money in houses. No kidding its very independant. Once again. It's no prediction. It's based on the fact that ez-credit is gone. Simple as that. I could lay it out for you again. It's simple. The Prince that farts out paper. Isn't giving anymore credit. They raked in a lot of money the last three decades. I have gone over it once. It's really very simple.

What I see in my area are 3 desirable properties priced extremely low, and probably >50 interested parties of which none of them will overbid by much.

Here are 2 of the 3 I’m talking about. I already am in contract with the 3rd :)

http://www.redfin.com/CA/Daly-City/32-Christopher-Ct-94015/home/578094

http://www.redfin.com/CA/Daly-City/679-Saint-Francis-Blvd-94015/home/2026036

Edit: Here’s a 4th, but it’s considerably smaller.
http://www.redfin.com/CA/Daly-City/684-Higate-Dr-94015/home/1889582

How are these highly desirable other than being 4BR (permitted or not)? The one on Christopher is on the on-ramp between Skyline and Hwy 1. The one on Higate is on Skyline. The one on St. Francis is a teardown, as someone already said, and the location is basically across the street from Serramonte backing up to large apartment buildings.

Are you buying the 3rd one to rent? What would you rent these houses for and what would your cap rate be?

toothfairy says

It must be becoming more local I just got an email sayin my zillion estimate up 10% last month

I don’t put much faith innzillows numbers but they usually get the direction right

I would look more at $/sqft sold.

corntrollio says

How are these highly desirable other than being 4BR (permitted or not)? The one on Christopher is on the on-ramp between Skyline and Hwy 1. The one on Higate is on Skyline. The one on St. Francis is a teardown, as someone already said, and the location is basically across the street from Serramonte backing up to large apartment buildings.
Are you buying the 3rd one to rent? What would you rent these houses for and what would your cap rate be?

I see how these can be problems for certain people but truth is it doesn't bother alot of people. The Saint Francis one is on the crappier side but it is certainly not a tear down. I see all this as convenience. I'm going to occupy the property I'm buying. But the neighbor a few houses away is renting the entire house for $2500/month. That's a 6.8% annual return.